WASHINGTON — A much talked about new facility to support women entrepreneurs in developing countries — informally dubbed the “Ivanka Fund” since it was conceived at the suggestion of President Donald Trump’s eldest daughter and senior advisor — is officially open for business, having raised $350 million in just five months.
The World Bank has moved quickly to create the Women Entrepreneurs Finance Initiative, or We-Fi, which was officially launched during the institution’s annual meetings in Washington, D.C., last week. The bank’s President Jim Kim revealed more about the facility during a side session called Taking Women Owned Business to the Next Level convened on Saturday, which featured Ivanka Trump, as well as three women entrepreneurs from developing countries.
Despite strong evidence showing the economic and social benefits of supporting women-led businesses, female entrepreneurs still face significant obstacles. Some 70 percent of women-owned, small and medium-size businesses in developing countries are starved of financing leading to an annual $300 billion annual credit deficit, according to the bank. Business women also face other challenges, including legal and policy barriers and limited access to professional networks, information, and technology.
Read more Devex coverage of the World Bank annual meetings:
Philippe Le Houérou, head of the International Finance Corporation, opened Saturday’s session by explaining why women entrepreneurs are a good investment for his institution, which will be applying to the We-Fi, he said.
“In many [countries] investors wrongly believe that women-owned businesses are higher risk, but our experience in IFC is exactly the opposite. In fact as a group, women who run businesses pay back loans at higher rate than men,” he said, adding that, “so for me as CEO of IFC, women-owned business is good business.”
Starting from the premise that “investing in women is great business,” Ivanka Trump told the audience her idea for the facility came out of a realization that aside from microfinance, very little was being done to solve the liquidity problem for women-owned business. On the advice of German Chancellor Angela Merkel, she approached the bank’s president to discuss what more could be done. “We started talking about how we could … create something revolutionary … to eliminate the barriers to accessing capital, networks, and mentors,” she said, adding that We-Fi would “take a major step in doing just that” and be “something truly revolutionary.”
Kim said We-Fi has been structured as more than just a financing facility. While it will support projects and programs that offer financing to women-led businesses, a large chunk of its work will also drive reforms within governments to break down legal and regulatory barriers, which hold women back. According to Kim, We-Fi is “the first platform to do this.”
The United States, along with 13 other countries, is a founding contributor to the fund, which has raised $350 million to date. We-Fi’s other donors include Canada, Germany, and the United Kingdom, and also some more surprising supporters, including China, Russia, Saudi Arabia, and the UEA. The facility aims to use this donor funding to leverage more than $1 billion in additional funding from institutional and commercial investors.
We-Fi was greeted with skepticism in some corners when it was first mooted in April as concerns were raised about the exact nature of Ivanka Trump’s role. However, the bank has made it clear that she will have no official role in fundraising or operations. During the session on Saturday, Trump herself said she hopes to be an “active participant” in parts of the facility, but as a fellow entrepreneur — for example by offering her services as a mentor.
The day-to-day running of We-Fi will be done by a secretariat based out of the bank’s offices, Caren Grown, head of gender equality at the bank and who has been closely involved in setting up the facility, told Devex. The U.S. Treasury Department and the White House also had input in the facility’s design, she said. The secretariat will report to a governing committee made up of representatives from the ministries of finance and foreign affairs of the 14 founding countries, and which met for the first time last week.
Grown described the structure of the facility as “unique” and that is was developed by applying the best lessons from the bank’s years of experience managing trust funds, its work on public-private-partnerships, and impact evaluations of what works for female SMEs.
First call for proposal
We-Fi has just issued its first call for proposals, to which seven multilateral development banks are eligible to apply by December, Grown said. All applications will first be considered by a team of external technical experts before going to the governors, and the first grant should be allocated in February 2018.
In terms of the kind of work We-Fi’s governors will consider, Grown said she expects to see a range of proposals, including both public and private activities beyond just offering access to finance and easing collateral constraints.
“Financing is not the only constraint women entrepreneurs face,” she said, and so the applicants will need to demonstrate how their intervention will work to improve market access, means of increasing their sales and profits, overcoming information barriers as well as legal and policy barriers.
“We-Fi is asking [the MDBs] to apply innovation to get the institutions they work with, such as banks and equity funds, to put in place systems to target female SMEs and capture information on the women they are supporting,” Grown said.
Grown also said each implementor would be required to carry out impact evaluations to measure the effectiveness of their projects.
Read more international development news online, and subscribe to The Development Newswire to receive the latest from the world’s leading donors and decision-makers — emailed to you free every business day.